June 2019 Upgrades – Extra customisation options have been made available to Auto-Lenders to enable them to personalise their allocation settings. In addition to option to choose which of our markets to allocate available cash to, they can also set a monetary maximum investment per loan and change the maximum loan term.
As we approach six months since the launch of our Auto-Lend option, we thought we’d update you on the progress of the facility to date – as well as marking your card about a new customisable option available to you from Today.
Available from August last year, Proplend Auto-Lend has given new and existing Lenders another way of allocating their available cash on account to our commercial property secured loans. A hassle-free facility that looks to get funds allocated as quickly as possible, to our safest Tranche A investments.
How does it work?
Auto-Lend works at account level, with Lenders enabling the facility via their secure Classic, Pension and ISA dashboards. Historically, Lenders have been able to choose at the point of enabling whether they want cash from redeemed loans to be automatically reinvested. From today, in response to Lender feedback, we’re also offering them the choice of which of our markets they want their funds allocated to. Our primary ‘In Funding’ market for new loans, our secondary ‘Proplend Loan Exchange’ market for active loans, or both!
With the facility investing to eligible loans on both markets to date, anyone with Auto-Lend on at the time of this enhancement has been defaulted to the ’like for like’ selection of allocation to loans on both markets. Allocating to both will typically mean cash is deployed quicker, albeit just like Auto-Lend itself, we understand this may not be everyone’s preference.
[Proplend’s secondary market offers access to active loans that are already interest-bearing – giving Lenders the opportunity to start earning immediately and diversify into loans that pre-date their joining the platform. Auto-Lend therefore works particularly well for new Lenders enabling the facility from outset. Existing Lenders can also benefit from enabling the facility too, while some may prefer to disable this market if they are looking to maximise diversification.]
How can I change my Auto-Lend preferences?
To change this default ‘all market’ selection, existing Auto-Lenders simply need to login to their relevant Proplend account(s) and select the ‘Turn Off’ button (under ‘Actions’). Then, ‘Turn On’ the facility again to see the selection options for both markets. Untick the market you don’t want and click ‘Agree’.
Lenders who may be encouraged to use Proplend Auto-Lend for the first time on account of this increased customisation, will also see this same default selection when they turn on the facility. They too can deselect the market they don’t want their Auto-Lend to allocate to and decide whether they want to disable capital reinvestments.
It’s important to remember that Auto-Lend will not ‘run’ immediately after turning on the facility. For enabled accounts with available cash, it runs every weekday for the secondary market (after 3pm), as well as being given priority (Tranche A only), typically around 11:30am – half an hour before new loans are made available to manually invest in.
What is the relevance of the target 5% return (after fees)?
Our target return for Auto-Lend is neither a guaranteed, nor a capped rate. It is intended more as an indication of what Lenders who’ve enabled the facility can reasonably expect to earn (once invested) on their allocated funds [given the limited risk exposure Auto-Lend exposes them to].
At 5% (net), the vast majority of our historical platform loans become eligible and we are not excluding loans unnecessarily from the facility – helping us deploy your funds quicker. It also reflects the risk-adjusted returns from our lowest risk Tranche A investments. With a maximum 50% LTV, they are first in line to be repaid and the securing property would have to more than halve in value before there is a risk of capital loss.
More than double the current rate of inflation and more than six times the current Bank of England base rate, we believe 5% is an attractive low-involvement return to suit the majority of risk appetites. Not bad for an investment (Tranche A) that P2P specialist agency 4thWay describes as “Astoundingly attractive for the risks involved” and rates as “fantastically low” risk.
How is Auto-Lend performing to date?
We don’t limit the potential upside or retain returns in excess of the target. Auto-Lend is currently tracking at 6.8% after fees based on all the eligible loans since we launched the facility – all of which has been passed on to participating Lenders.
Depending on what loans are available when you have cash available, you may be allocated to a Tranche A investment returning 5% or you may be invested to a loan paying 10% for Tranche A – not all Auto-Lenders earn the same aggregate returns, but we expect them all to achieve the target rate.
ISA ‘season’ benefits and plans for further Auto-Lend customisation
With the current tax year drawing to a close and a new one around the corner, the Auto-Lend functionality should prove particularly useful for Lenders adding new funds to their accounts in March and April. ISA subscription limits need to be used up or lost before 5 April, with a new £20,000 annual allowance available to save or invest from the 6 April.
But Auto-Lend is not only useful for allocating subscriptions, it can also help take the hassle out of deploying funds transferred from existing ISAs too. You can open new ISAs and top up existing pots with ISA transfers – whenever you want, whether you’ve got any remaining ISA allowance or not.
An increasing proportion of our loans are filled using Auto-Lend, which also helps us share each loan among more participating Lenders. As we speak, 98% of available cash in Auto-Lend accounts has been deployed, with ISAs representing an increasing share of enabled accounts but the majority (c.60%) Classic still representing the majority (c.60%) of enabled accounts, but the ISA share increasing.
Whilst Auto-Lend was originally designed as a low-risk, low-involvement investment tool, we are keen to explore other customisation options that will help make it more useful for more Lenders, including specifying your own target return and specifying a maximum exposure to a single loan below the current 20% (both of which while likely to reduce the speed at which available cash is deployed, would offer extra control).
Related to this post …
Find out more about Proplend’s auto-investment facility; Auto-Lend
Getting started with Proplend – opening an account with Proplend and enabling Auto-Lend
More about Proplend’s LTV-based tranching system – including our ‘safest’ Tranche A Investments
Risk adjusted returns – find out more about why P2P lending rates vary
